Businessweek Archives

Nursing Homes May Not Be The Last Resort

August 15, 1993

Economic Trends

NURSING HOMES MAY NOT BE THE LAST RESORT

It may be possible to get adult children to share more of the burden of caring for their elderly parents--and thus lower the government's bill for nursing- home care. In a recent National Bureau of Economic study comparing Medicaid-sponsored nursing-home programs in different states, David Cutler and Louise Sheiner found that the more liberal the rules governing such care, the more elderly people made use of the homes. States that subsidized care for higher-income individuals had higher rates of use than stricter states. So did states with payments to homes closer to the steeper fees charged to private patients.

The economists' most surprising finding, however, was that states with less generous policies actually had more of their elderly living with their children. They conclude that "most of the elderly currently in government-financed nursing homes otherwise would be living with their children, not by themselves." With America's nursing-home bill already consuming 1% of gross domestic product and headed for explosive growth, such findings suggest that policymakers may have more leeway than they suspected in designing programs to minimize both social and economic costs.GENE KORETZ